APA Group: Growth opportunities

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 03 Jul 2017   Posted by admin

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All images: APA Group.


BY ELIZABETH FABRI


AUSTRALIAN diversified energy company APA Group continues to go from strength to strength. In the last six months the company struck a handful of deals that will underpin its position as one of Australia’s leading energy infrastructure enterprises with expertise in transmission, networks, power generation, and most recently, renewables.


With more than $20 billion of energy assets to its name, APA Group has worked its way up the ranks since its 2000 founding, today delivering half of Australia’s natural gas.

Starting with an interest in 7700km of transmission pipelines, today APA owns and operates more than 15,000km of pipelines and 4100km of distribution networks, gas storage facilities, gas-fired power stations and a wind farm – not to mention the string of developments projects underway, including the 110MW Darling Downs Solar Farm and the 20MW Emu Downs Solar Farm.

In the first half of 2017, the company’s portfolio expanded further, with news it would purchase the Orbost Gas Project and Darling Downs Solar Farm. It also plans to begin development of the $500 million Western Slopes pipeline in NSW; a new gas transmission pipeline and a gas–fired power station to provide power to the Gruyere Gold Project in WA; and a pipeline connecting Queensland’s Bowen Basin to the east coast gas markets.

In January APA Group also commenced a three-year multi-asset and multi-service gas transportation contract with AGL Energy which will deliver about $40 million per annum in revenue.


2017 highlights


Western Slopes Pipeline

APA Group’s 2017 year got off to a promising start, with a new contract signed to develop a 450km pipeline to connect Santos’ proposed Narrabri Gas Project to the NSW gas transmission network, via the Moomba Sydney Pipeline.

On 31 January, APA Group entered a Project Development Agreement with a Santos subsidiary to begin work with the community and regulators.

The announcement was a welcome surprise for shareholders, given the Narrabri project had been prescribed a ‘non-core asset’ by Santos a month earlier.

Once built, APA’s Western Slopes Pipeline would have capacity to transport up to 200 terajoules per day, while the Narrabri Gas Project had potential to supply up to 50 per cent of the natural gas needs of more than 1.1 million homes and 30,000 businesses.

In February APA Group began the formal approval process, and lodged an application to the NSW Department of Planning and Environment.


Sole gas project

APA had also been actively involved in Cooper Energy’s planned $605 million Sole gas project, off the coast of Victoria.

In February, the company signed a heads of agreement to acquire Cooper Energy’s Orbost processing plant, which will process gas from Sole once the field enters production.

On 1 June, APA inked an agreement to purchase, upgrade and operate the plant at a total cost of about $270 million.

The transaction was expected to be complete in August, subject to Cooper Energy’s final investment decision and project approvals.

APA said it anticipated the project upgrades to be complete by mid-2019, with scope for the plant to also process gas from Cooper Energy’s nearby Manta gas field.


“We are pleased to have reached a binding agreement with Cooper Energy on this transaction, at a time when there are calls for increased gas supply into the east coast gas market,” APA chief executive and managing director Mick McCormack said.


“When APA provided its growth opportunities outlook of $1.5 billion over the next 3 years at the FY2016 results, $300 million of that was to come from expansions in the midstream infrastructure sector.

“This project fits our successful and sustainable investment criteria.”

 

Bowen Basin Pipeline

On 20 June, APA also entered a non-binding Memorandum of Understanding (MOU) with Blue Energy to develop a pipeline to transport gas from the company’s gas projects in the Bowen Basin to NSW, Victoria and South Australia.

The announcement followed a 2016 agreement with Comet Ridge for APA to develop a pipeline that would connect Queensland’s Galilee Basin with APA’s east coast grid, resulting in a total of about 750km in greenfields transmission pipeline in the region, worth $800 million.

Mr McCormack said APA was pleased to be working with Blue Energy at their Bowen Basin project, and the deal reinforced the interconnected nature of its East Coast Grid.

“APA’s East Coast Grid is the only one of its kind in the world and enables large and small producers alike to respond to price signals and get more gas supply to markets across the eastern states,” he said.

 “Significant investments like these require incentives to invest and the certainty of the rules around those investments for both the pipeliner and customers alike.

“We look forward to working with all of our stakeholders – customers, community and governments – to bring these projects to fruition.”

 

Gruyere Gold Project

APA will also build the new 198km Yamarna Gas Pipeline and 45 megawatt gas-fired power station for Gold Road Resources and Gold Fields Limited joint venture Gruyere Gold Project in WA at a total cost of about $180 million.

Located north of APA’s Eastern Goldfields Pipeline, the power station and pipeline would be designed, built, owned and operated by APA, and supply energy for the Gruyere project for an initial 15 year contract.

APA would transport gas to the site using four interconnected pipelines; the Goldfields Gas Pipeline, Murrin Murrin Lateral, Eastern Goldfields Pipeline and the proposed Yamarna Gas Pipeline.

Mr McCormack said commissioning was expected to begin in late 2018, ahead of first production at the mine in early 2019.

“I am very pleased to announce this organic growth project – it ticks all the APA boxes in terms of demonstrating our capability in energy solutions and construction; leveraging APA’s interconnected energy infrastructure; and long term contracts with highly creditworthy counterparties,” Mr McCormack said.

 

Darling Downs solar

In May, the company also agreed to purchase the 110MW Darling Downs Solar Farm from Origin Energy, with an option to acquire Origin’s nearby Beelbee Solar Farm Development site.

Located 45km west of Dalby in south-west Queensland, the project was expected to generate enough energy to power 32,000 homes, and contain 430,000 solar panels that will connect into Powerlink’s existing Braemar Substation.

In a statement, APA estimated the acquisition and development costs to come to $200 million, which would be funded through cash flow and a $20 million grant from the Australian Renewable Energy Agency (ARENA).

Under the deal, Origin Energy would purchase all of the energy certificates from the solar farm until December 2030, with the project mapped to come online in late 2018.

 

Outlook

Through looking at APA’s newly announced projects in 2017 alone, it is safe to say the energy company will be exceptionally busy over the next few years.

 “As an energy infrastructure provider, APA has been and will continue to be part of the solution of getting more gas into the market to put downward pressure on the price of gas to consumers,” Mr McCormack said.

“We continue to work collaboratively with existing and new customers in providing innovative new gas transportation services.”

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